Standardized solar contract signals new era of cost transparency

Jul 4, 2017

A new industry-standard PV operations and maintenance contract and best practice guidelines will help cut primary and secondary market costs and lower barriers to entry, Vassilis Papaeconomou, Managing Director of Alectris and Chair of SolarPower Europe's Best Practices Task Force, said.

SolarPower Europe's new industry-standard O&M contracts and best practice guidelines aim to optimize investments across a wide range of technologies and locations.

A rapid fall in utility-scale PV costs in recent years has raised the importance of operations and maintenance (O&M) efficiency and greater competition in the solar O&M market has led to a range of service offerings.

While operators are implementing more sophisticated O&M packages, the metrics, practices and contracts vary widely and many firms are not fully-optimizing growing datasets and analytics capability.

Some 70% of industry participants believe there is ‘significant’ or ‘much’ improvement needed in the quality of solar plant operations, in particular the monitoring of equipment and analytics, according to a new survey by industry group SolarPower Europe.

The survey found that almost 70% of project stakeholders believe O&M is either important or very important to their business and their main concern is the consistency of quality of O&M activities, Papaeconomou told the PV Asset Management and O&M Europe 2017 conference on June 13.

The survey results show stakeholders understand the value of O&M and support an industry shift towards best practice guidelines, Papaeconomou said.

"This is tangible proof that people do value quality and more importantly consistency of quality, which in essence means standardization," he said.

Growth boost

The standardization of O&M practices specifies a minimum set of requirements and activities and defines how these should be conducted. These standards can be applied to different types of projects, for example plants with different technology or location classes.

Standardization will be a key driver of solar market growth and the maturing of the O&M market, Papaeconomou told the conference.

Across industry, markets that have implemented standardization have typically experienced exponential growth, for example in the airline or finance sectors, he noted.

Forecast annual solar installations in Europe

(Click image to enlarge)

Source: SolarPower Europe: 'Global Market Outlook 2017 to 2021.'

Standardization increases the confidence and transparency between stakeholders, Papaeconomou said.

"In other words, people talk the same language and have the same expectations," he said.

Best practices also lower project soft costs and risks and facilitate transactions, including those in the secondary market, Papaeconomou added.

"Since we have transparency, lower costs and better understanding, it also lowers the barriers for new entrants in the market," he said.

New contracts

Last year SolarPower Europe published its first ‘O&M Best Practice Guidelines for PV solar plants’ in a push towards industry-wide standardization.

The guidelines proposed basic universal performance metrics for professional O&M services, based on insight from O&M Service Providers, Asset Owners, Asset Managers, Technical Advisors and manufacturers.

SolarPower Europe is now working on an updated version of these guidelines and is collaborating with the International Renewable Energy Agency (IRENA) and the Terrawatt Initiative (TWI) to create a standard contract template for O&M, Papaeconomou told the conference.

"Once we have a set of best practices that the market commonly agrees on, we can take the next steps, which is standardizing contracts," he said.

The guidelines published in 2016 distinguish between Plant Performance Key performance indicators (KPIs) which “directly reflect the performance of the plant and are under the duties of the O&M Contractor,” and O&M Contractor KPIs which “reflect the performance of the service.”

While the Plant Performance KPIs are quantitative and measure the plant performance ratio, plant availability, uptime and energy output, the O&M Contractor KPIs are both quantitative and qualitative.

Performance should be rated against these indictors and translated into bonus schemes and liquidated damages, ensuring the asset owner will be compensated for poor reaction times or availability performance, the guidelines said.

SolarPower Europe plans to publish the updated guidelines and the new standard O&M contract template this December and it hopes the documents can become globally-acknowledged standards, Papaeconomou said.

The industry group is currently working hard to disseminate the information to industry participants inside and outside of Europe, he said.

"This is very important because it is not enough to have a very mature, pragmatic document, it needs to be well-known in the market-- it needs to be adopted in the market."